6-164 Senate Testimony on the European Recovery Program, January 8, 1948

SENATE TESTIMONY ON THE EUROPEAN RECOVERY PROGRAM
January 8, 1948
Washington, DC

COMMITTEE Chair Arthur Vandenberg’s first question to Marshall was “whether there is any dependable hope for this program without a restabilization and integration of western Germany into the program.” Marshall replied that it was “essential that western Germany be considered as an integral part of the program,” especially since Germany was a major source of coal, which was “one of the great essentials to the recovery program.” The secretary agreed that Britain, France, and the United States would no longer seek Soviet agreement for the integration of their zones of Germany. (Committee on Foreign Relations, European Recovery Program: Hearings, pp. 11–12.)

Vandenberg had Marshall describe the chronology of activities in Europe in response to his June 5 Harvard University address, particularly the mandate for European initiative and cooperation and the Soviet Union’s “hostility.” (Ibid., pp. 13–16.)

Marshall was interrogated at some length about the administrative structure that would handle the European Recovery Program. The senators were concerned about potential conflicts between the State Department and the independent agency that Marshall recommended. One thing he did not wish to repeat, Marshall said, was the confusion and duplication of effort that had occurred during the recent war when Executive orders establishing the Office of War Mobilization and the Foreign Economic Administration stated that these agencies would act “in conformity with the foreign policy of the United States, as defined by the Secretary of State.” In practice the secretary of state could submit his views on the implications of the agencies’ activities, but the agencies could ignore them. Consequently, Marshall noted, the European Recovery Program bill stipulated that on matters of foreign relations the new independent agency would act “under the direction and control of the Secretary of State.” (Ibid., p. 17.) There remained considerable room for conflict, he admitted, if the people in charge were determined to be combative. “You have to trust to a certain degree to the judgment of individuals.” (Ibid., pp. 17–28, 53–54, 61–63; quote on p. 25.)

The discussion turned to the problem of the lack of convertibility between one currency and another and the impact this had on trade and investment. One part of the European Recovery Program bill was to encourage private capital investments by insuring that the profits from such could be converted into US dollars. (Ibid., pp. 29–31, 65–66.)
Marshall did not think that aid would foster a belief among Europeans that the United States would take care of them no matter what they did. “I think the general effect is exactly the contrary. . . . We are dealing with sick nations. Now, you do not get very much out of a sick man at the start. You first have to get him on his feet. You have got to get him started again. You have to give him a little faith in himself. That is what we started.” European self-respect and nationalism would prevent any continued feeling of dependence on the United States. “I think that we fail in quite a measure to appreciate the amount of national pride involved in this problem.” (Ibid., pp. 32–33.) Moreover, Marshall did not “assume there will be much gratitude” from the recipients. “You always get in trouble when you give. I think that is a well-known fact of life.” What the United States wanted, he said, was “to terminate the continual necessity of giving this assistance, and to create a condition of stability which will favorably affect the entire world.” (Ibid., p. 35.)

Marshall explained the status of US policy regarding the removal by the Soviet Union of German capital goods for reparations and the likelihood that some portions of recovery plan funding could be offset by European contributions. He rejected the idea of the United States using the program to acquire military bases or trying to pressure European governments to suppress severe labor strikes. (Ibid., pp. 36–41, 63.)

Marshall’s opinion was that had the east European countries participated in the recovery program, the cost to the United States would not have increased and it might even have been lessened. “There is no question whatever that the more nations that engage in this cooperative effort the quicker the readjustment and rehabilitation would be achieved.” West Europe’s food problems—a significant portion of the cost to the United States, particularly in 1948 and 1949—would likely have been eased by agreements with east Europe’s agricultural producers. (Ibid., p. 46.)

Several senators expressed concern over the impact the recovery plan would have on the United States economy—for example, whether it would create shortages of goods and stimulate inflation. “From all information that had come to me,” Marshall responded, “the program does not involve as much of inflation as some seemed to feel, and that it would not create a situation for us that was serious in comparison to the troubles that we were trying to meet abroad.” (Ibid., pp. 57–59; quote on p. 58).

Faced with questions about details of the program, Marshall often turned to Lewis W. Douglas, US ambassador to Great Britain and a former businessman and economist. Douglas noted that State Department planners hoped that Latin American nations would contribute up to $700 million for European recovery, and that the distribution of US funding might roughly be 20 to 40 percent loans and 60 to 80 percent grants. (Ibid., pp. 52–53, 64.)

Near the end of his five hours of testimony, the secretary was asked if the United States was capable of promoting increased integration among the European nations. That was “one of the delicate phases of the problem, that we do not move in such a way as to awaken hostilities because of national pride, or that we do not offer something in a measure or form suitable for propaganda distortion by those who are trying to sabotage the program.

“My concern in the matter, to state it very frankly, is to get this affair going in such a way that the cooperation, the commitments, which bring those countries closer together will increase rather than remain as they are at the time they begin to get more or less on their feet.

“The critical time will come, if we are successful, as I am firmly convinced we will be, when the ‘heat’ is off, the program not completed but the ‘heat’ is off. People make many promises and think they will do all sorts of things until they begin to get clear of a dilemma, and then they revert in the way human beings have been doing for many thousands of years. Nations react in very much the same manner, particularly when there is an active group seeking to tear down instead of build up.

“Just how we can manage to keep the process going toward further cooperation, toward a further consolidation of European states and a general integration, a mutual integration in relation to the economic work, is a matter of very great importance. I do not know just how that can be managed. I feel certain that if we had not had a tragic dilemma of vast proportions we never could have gotten these agreements out of the western nations at all. It could have been talked about and would for many, many years, but, like unity of command, all will agree with you in principle but they won’t agree with you when you get down to business, unless it is their man that is to command, unless it is their business that is to be protected.

“I do not know how long the development of integration will continue. I think it will continue, if we carry out this program roughly as proposed, for a period of at least 4 years, and I would assume that a very material gain would be made during that period. And I would also assume that as a result of that gain its advantages will become so evident, and we would have broken down so many of the minor oppositions which have a major effect, that from there on the course would not be quite so difficult.” (Ibid., pp. 69–70.)

The $6.8 billion European Recovery Program request, Marshall said, “which is a very sizable amount for us to consider for the American taxpayer, is yet a very small percentage of the whole requirement, but it is the important portion needed to start the ball rolling. You might say it fulminates the charge. It will begin to break the bottlenecks.” (Ibid., p. 72.)